While the Ohio House of Representatives enjoys a summer break, members should bear in mind an important bit of unfinished business from the recently ended session: reforming the terms of Ohio’s five public pension systems.
The retirement plans, funded by taxpayer-supported government agencies as well as public employees’ contributions, must change a variety of terms, including retirement age, contribution rates and payout calculations, if they are to ensure long-term solvency.
The boards that administer the plans have been asking lawmakers for several years to approve changes. While the Senate approved bills regarding all five in May, the House of Representatives declined to take up the matter before the recent recess. Leaders say they hope to address it before the end of the year.
The longer such reforms are put off, the further out of fiscal balance the pension funds get, and the tougher the remedy. Eventually, changes might include a part of the pension benefit that isn’t mandated by law but has grown enormously expensive: health care.
Subsidizing health-care coverage for retirees too young to qualify for Medicare long has been a self-imposed burden on public-pension plans.
The burden is self-imposed in two ways: State law doesn’t require any coverage, but also, it would not be as necessary or widely used if the public-employee pension plans didn’t allow people to retire so much earlier than is typical in the private sector. Many public employees can retire in their late 40s or 50s, long before they are old enough to be eligible for health-care coverage through Medicare.
That’s why raising retirement ages, as the reforms approved by the Senate generally do, will lessen the need to trim health-care benefits.
Still, one of the five plans, the Ohio Public Employees Retirement System (OPERS), already is warning members that their health-care benefit is likely to change, even if other reforms are approved. Trustees of the plan are considering requiring retirees to be older and have more years of service before they qualify for coverage, reducing the amount the plan will pay toward premiums, limiting or eliminating coverage for spouses, along with other cutbacks.
A blog entry on the pension system’s website tells employees that the legislature’s failure to act on requested plan changes for more than two years “has played a major role” in the need for health-care cutbacks, but that changes would be necessary in any event. This is because health-care costs are rising, people are living longer and the retirement of the baby-boomer generation will greatly increase demands on the system.
Lawmakers in the House can help by passing pension-reform legislation before year’s end. If they don’t, plan administrators say, changes to health care will have to go beyond painful to drastic: cutting expenditures by two-thirds, which would mean offering only limited coverage.
Comments on the OPERS website indicate how unhappy members and retirees will be with cutbacks to health-care coverage through their pensions.
But the alternative — a pension plan that goes bust — is much worse.